Urban Local Governments need a share in the GST
January 2026
Cities are often recognised as engines of economic growth. It is estimated that they contribute over 50 per cent of national output. With India aspiring to become a ‘developed’ economy by 2047, cities will need to play an important role in supporting the required economic growth. This will be possible only with strong city governments.
However, the current situation in India is of “rich cities, poor city governments”. Urban Local Bodies (ULBs) in India do not receive an adequate share of tax resources despite economic prosperity emerging from these cities. The Ministry of Housing and Urban Affairs (MoHUA)’s average annual expenditure over the last 10 years was estimated to be only ₹0.5 lakh crore, which is less than one-fifth of the estimated minimum investment requirement. This large gap in available resources has resulted in poor infrastructure development, limited improvements in service quality, and a worsening resilience of cities to meet the challenges of water shortages and contamination, as well as traffic and flooding. The recent introduction of Goods and Services Tax (GST) in India has probably made cities even poorer. This is of concern as India already has poor performance in global comparison with regard to intergovernmental transfers (IGTs).
